How to calculate food cost (formula and worked example)

The food cost formula

Use the same unit on both sides of the division. If you bought by the kilo and the recipe uses grams, convert first: 1 kg is 1,000 g and 1 L is 1,000 ml. Things you count need no conversion: 8 eggs from a tray of 30 is 8 ÷ 30 of what the tray cost.

Step by step

1. List every ingredient, including the small ones: oil, salt, stock, spices. Each is cheap on its own, but together they add up.
2. Write down what you actually paid and the size of what you bought: a 10 kg bag, a 2 L bottle, a tray of 30 eggs. Use your latest receipt, not a price you remember.
3. Write down how much of each the recipe uses for one batch.
4. Work out each line: price paid ÷ pack size × amount used.
5. Add the lines up. That is the food cost of the batch.
6. Allow for waste: trimmings, spoilage and food you cannot sell.
7. Divide by the number of portions the batch makes.
8. Divide the cost per portion by your selling price and multiply by 100 for the food-cost percentage.

Worked example: chicken and rice for 10

Here is a simple pot of chicken and rice that makes 10 portions. The prices are round numbers so the arithmetic is easy to follow; the method is the same in any currency.

Take the rice: the 10 kg bag cost 15,000, so a kilo cost 1,500, and the pot uses 2 kg: 15,000 ÷ 10 × 2 = 3,000. The oil needs a unit change first: the bottle holds 2,000 ml, so 2,000 ÷ 2,000 × 300 = 300. The stock cubes are counted: 4 cubes from a pack of 10 that cost 500 is 500 ÷ 10 × 4 = 200.

Added up, the pot costs 9,000 to make, so each of the 10 portions costs 900 in ingredients. Sold at 3,000 a plate, the food-cost percentage is 900 ÷ 3,000 × 100 = 30%.

Allowing for waste

Not everything you buy reaches the plate. Vegetables are trimmed, rice sticks to the pot, a portion gets dropped. If about 10% of the food is lost, you must buy enough to cover the loss as well, so divide the food cost by what is left, 0.9. That comes to a little more than adding 10%.

The same idea gives you the real cost of an ingredient with a known yield. If a kilo of whole fish gives 650 g of fillet, the fillet costs the price per kilo ÷ 0.65. Cooks call this the difference between the as-purchased and the edible portion.

Food cost is not the whole cost

Food cost covers ingredients only. The gas under the pot, the person who cooks it, the packs you serve it in and the trip to the market are real costs too. Keep them in view when you set a price: a food-cost percentage that looks healthy can still hide a loss once labour and packaging are paid. Monthly bills such as rent are easier to cover through your prices as a whole than through any one recipe; how to price a menu item shows how.

Common mistakes

• Costing the pack instead of the amount used. A 2,000 bottle of oil is a 300 ingredient when the recipe uses 300 ml.
• Leaving out the small things. In the example, the oil and the stock cubes add 500 to the pot.
• Using old prices. Market prices move, and a recipe costed months ago can be well out of date.
• Mixing units. Dividing a price per kilo by an amount in grams makes a line a thousand times too cheap.
• Forgetting waste, so every plate quietly costs more than the sheet says.
• Treating the batch cost as the portion cost, or the other way round. Always divide by the number of portions the batch really makes, at the portion size you really serve.

How often to recalculate

Recost a recipe whenever the price of one of its main ingredients changes, and look over the rest regularly. Weigh a few portions now and then too: if the plates going out are bigger than the recipe says, the real food cost is higher than your sums.

Once you know the cost per portion, choose a food-cost target and set your price. If you talk about profit in percentages, markup vs margin explains which is which.